It is not coincidental that Apple (NASDAQ:AAPL) just canceled its Buy Now, Pay Later (BNPL) service just a year after the launch. It turns out, the macroeconomic data is not looking good. In May, the Federal Reserve Bank of New York reported $1.12 trillion in credit card debt, up 13.1% from the year-ago quarter, signaling potential red flags for semiconductor stocks to sell.
Combined with the personal saving rate dropping to the range during the Great Recession of 2008, this makes for a weakened consumer. Nominally, retail sales have increased over the last year by 2%, but if adjusted for inflation they dived into negative 1.2% territory.
This signals consumer contraction. If sustained, consumer spending contraction could trickle down to business revenues. Yes, even ones in the semiconductor sector buoyed by the AI hype. To cut off this impact on portfolios, here are three semiconductor stocks to sell.
Nvidia (NVDA)
It is exceedingly rare to have such a clear-cut case of locking in profits as is the case with Nvidia (NASDAQ:NVDA). Over one year, NVDA stock is now up 209%, outpacing even Microsoft (NASDAQ:MSFT) as the world’s most valued tech company at a $3.34 trillion market cap.
However, is it reasonable for a single company to have more value than all countries’ GDPs in the world except for India, Germany, Japan, China and the U.S.? In such a scenario, the company would have to provide a singular offering, but this is not the case.
Nvidia is a fabless chip company, reliant on Taiwan Semiconductor Manufacturing Company (NYSE:TSM) and other semiconductor foundries to follow through on Nvidia’s designs. And even in that arena, AMD (NASDAQ:AMD) is there with its counter offering courtesy of MI300X AI chips that Microsoft integrated into its Azure cloud.
No doubt, Nvidia cemented its dominating position across discrete GPU and data center markets. The current momentum is a fruit of Nvidia’s coordinated and timely effort to deploy software frameworks coupled with hardware, outpacing the competition.
Yet, such a momentum and investor frenzy propelled Cisco (NASDAQ:CSCO) to also outpace Microsoft as the world’s most valuable company in the early 2000s. Should investors ignore the warning signs?
At the present price of $135.58, NVDA stock is more than double over its 52-week average of $63.80 per share. This makes NVDA shares as one of the top no-brainer semiconductor stocks to sell at this point in time.
Intel (INTC)
Intel (NASDAQ:INTC) is one of the main beneficiaries of the CHIPS Act, having received $8.5 billion in direct funding and up to $11 billion in loans. The company has been clearly selected by the powers that be to hold the semiconductor torch within U.S. borders. By 2030, Intel hopes to sandwich itself between TSMC and Samsung as one of the world’s top chip foundries.
However, Intel’s foundry expansion plans are costlier than anticipated. The expansion to two foundries in Arizona were initially targeted for $10 billion, ending up in the $30 billion range. It is also unclear how Intel will fulfill its staffing needs under the burdensome DEI regulatory umbrella.
Even more importantly, Intel’s quality processes seem to be eroding. Presently, many gamers who bought Intel Core i9 chips are plagued with crash issues. These unprecedented hardware failures at scale are still investigated by Intel, pointing to deeper QC issues.
In addition to expansion-adjacent costs, this paints a bleak picture for short to medium exposure to INTC stock. At the present price of $30.36, INTC stock is down from its 52-week average of $38.22. In fact, the current price is close to the 52-week bottom of $29.73 per share. Whether that is an exit or entry point is up to investors’ preferred time frame exposure.
Texas Instruments (TXN)
Known for its offering of analog semiconductors and embedded processors, Texas Instruments (NASDAQ:TXN) sells its products at scale across healthcare, communications, automotive and industrial and personal electronics.
Although this diversification helps to smooth out the semiconductor cyclicality, the company’s profits show it is still highly cyclical, having failed to achieve quarterly net income growth since Q3 2022. In Q1 2024 earnings, TXN reported 16% revenue decline alongside 35% net income decline year-over-year.
Trailing 12 months, TXN’s free cash flow shrunk by 79% compared to the year-ago quarter, going from $4.4 billion to $940 million. During that period the company invested $3.7 billion in R&D and selling, general, and administrative expenses (SG&A).
Just like is the case with Intel, it will take a while before TXN enters positive growth, minus the crashing scandal. This may well be prolonged if there is a hard landing, prompting businesses to forestall changing their hardware.
Nonetheless, at the present price of $196.25, investors are looking at a solid candidate for one of semiconductor stocks to sell. The price is above the 52-week average of $168.73 and close to its 52-week ceiling of $206 per share. This is a case of a solid stock to be revisited later on.
On the date of publication, Shane Neagle did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.